Our dedicated page on property refurbishment loans provides a useful summary of how these loans are can provide finance to modernise and refurbish, run down properties that are not currently in a livable or in a lettable condition.
To assist with these projects a unique product has been developed by Shawbrook Bank and is aimed at helping property investors and developers buy these run down properties, whilst minimising the funds the investor personally needs to put down as a deposit.
As well as providing the highest loan to value in the market the other key benefits are:
- The loan will be based on the market value of the property, which is what you as an investor would expect the lender to use. At Advocate Finance we see some lenders quoting high loan to values but then upon further investigate we discovered the loans are based off the Market value – 90 days day valuation, which can be a value 10%-15% lower than the true market value and effectively means it’s clever marketing but it is effectively a 75% or even lower property refurbishment loans that provides no additional funding to you.
- HMO conversations – You can also use this property refurbishment loan if you want to convert a house into a “simple” House in multiple occupation (HMO). For example converting a standard house into a 6 bed or less HMO as long as the conversion does not require planning or any significant alterations to the layout of the property.
Frequently Asked Questions
Question – How does it work?
The lender provides 75% of the purchase price plus up to a maximum of 10% of the purchase price towards the costs of the works. So in effect the day 1 loan is 85%. You have to have a 15% deposit and prove you have the remaining funds in a bank account to carry out the works.
Question – What do you mean by “+fees”
All lenders have an arrangement fee to cover their costs for setting up the loan. A large proportion of lenders that provide these property refurbishment loans deduct these arrangement fees, so if you start with 75% loan to value and deduct the fees you only end up with 73% at the start of the loan. This product adds the arrangement fee to the loan and in effect it provide a 86.95% loan whereas other lenders provide a 73% day 1 loan. When cash is tight on a project this can make or break a deal.
Are there any products offering more that 85% loan to value
We are not aware of another lender that offers more on a day 1 loan. 100% financing is available with additional security by way of an additional charge secured on another property which has enough equity to provide security.
Question – What are the costs?
There is a 1.95% arrangement fee that is added to the property refurbishment loan so in effect the loan provides 86.95% loan value. After you have completed on your first loan, the lender reduces the arrangement fee to 1.70%
Question – What works can be carried out?
Works need to be completed within 180 days and include but not limited to decorating, new kitchens and bathrooms, windows and doors, flooring, repair, remedial and improvement works. Works that are structural in nature generally are not acceptable.
Question – How is interest on the loan paid?
If you can provide income or cashflow evidence (bank statements) that prove you can service the interest monthly then a direct debit will collect interest monthly. Alternatively, the lender can retain interest for the duration or part duration of the loan, which effectively means the lenders holds the interest for the loan duration and you have no monthly payments to make.
Question – Do I need any experience?
To gain the 85% loan to value you need to be able to prove evidence of just 1 previous light refurbishment project between all applicants. If you can not provide this then the lender can still provide a 75% loan to value loan until you complete you first project.
Key Information and Benefits
- Speak to a consultant today for a free personal consultation and they will handle your case from enquiry to completion
- Flexible and creative financing solutions to meet your needs from our panel of 100+ lenders
- Loans/mortgages from £100,000 to £20 million (smaller loans only considered in exceptional circumstances)
- Market leading interest rates. The actual interest rate will depend on the risk, quality of the credit profile and the purpose of the loan/mortgage
- Lowest overall cost of financing will be considered for your individual case
- All incomes levels, evidence of income, credit histories and funding requirements will be considered
- High loan to values available 100%+ funding can be achieved with additional security or by introducing more than one lender to a case
- Financing terms can be short term (a few months) or long term (many years) to suit your needs.